The Finance Sector Union of Australia (FSU) was advocating for a Royal Commission well before it was called because we knew the banks had lost sight of their responsibility to customers and their staff.
We told successive inquiries the banks were driven only by profit and that consumers were the losers.
Now Commonwealth Bank senior executive Daniel Huggins, who heads CBA’s home loans division has admitted in evidence today to the Royal Commission that the bank’s commission structure was shot through with conflicts of interest.
While more than 50% of consumers now use mortgage brokers, assuming they will get a better deal, Huggins told the inquiry:
“Yes we have acknowledged a conflict in the commission structure. The larger the loan, the larger the upfront commission. The longer the loan and the longer it takes to pay off, the larger the trailing commission and that is a conflict.”
FSU National Secretary Julia Angrisano said it doesn’t end there. Customers would be horrified to know that brokers benefit financially from locking customers into larger loans for longer periods.
“What we have heard today is what we have known for a long time, the type and size of bonuses and commissions motivates people to act and behave in a certain way,” Ms Angrisano said.
“The Royal Commission provides an opportunity to overhaul incentive schemes paid to bank employed mortgage lenders and the trailing commission model paid to third party brokers.”
“If we get this right we will go a long way towards rebuilding the trust and confidence of our community.”
Media contact John Hill 0412197079